Interviews

U GRO Capital limited is a BSE listed, small business lending fintech platform which was instituted with the buyout of Chokhani Securities Ltd, followed by its re-capitalization and rebranding with new management team and business model. The company leverages its deep expertise around core sectors of MSMEs in India and follows a data centric and technology-enabled approach. Built on the fundamental pillars of knowledge and technology, the Company is focused on solving the unsolved credit gap of MSMEs. U GRO Capital has shortlisted 8 sectors basis an 18-month process involving extensive study of macro and micro economic parameters carried out in conjunction with market experts like CRISIL. The eight sectors shortlisted are Healthcare, Education, Chemicals, Food Processing / FMCG, Hospitality, Electrical Equipment and Components, Auto Components, Light Engineering. The Company additionally lends to microenterprises, which behave as a monolith and act a pseudo ninth sector. U GRO Capital has an extensive network of 34 branches and presence in 8 states across India. Within each sector U GRO has identified several subsectors to lend to.

U GRO has identified several sub-industries within food processing sector. Any MSME that is dependent on the food processing industry for a large part of its revenue is also categorised as a sub-industry within food processing. For e.g. we classify speciality logistics like cold storage etc. within food processing industry. U GRO lends to host of small business in the food processing sector like bakery products, snacks, chocolates, confectionary items, agriculture food processing like wheat mills, dairy, packaged food both perishable and non-perishable, speciality logistics like cold storage etc. Basis our estimates of the future outlook of the sub-industry within food processing, we manage our exposure. Currently, we are overweight on MSMEs dominant on consumer food space like bakery products, snacks, chocolates, confectionary items etc.

Technology is one of our most significant pillars for U GRO Capital, as it has leveraged the capabilities to a great extent to serve the SME customer base. While the pandemic pushed the entire economy in a static mode, U GRO Capital took rapid strides in technology integration. To serve during the pandemic, the company launched its aspirational programs viz. Sanjeevani & Saathi on its GRO+ platform. These initiatives bolstered the company’s reach across the MSME sector. These programs utilized meticulously designed algorithms to analyze the impact of Covid-19 on cash flows of customers and accordingly customized the eligibility criterion and the offerings. To serve during the contactless regime and enhance convenience for its customer base, it made the documentation simpler by considering only the banking & GST statements, provided by the customers digitally. 

The company’s flagship GRO+ platform is capable of onboarding MSME customers completely digitally while providing an in-principle decision within 60 mins. It is integrated with more than 25 APIs, has an OCR functionality and a completely automated rule engine GRO Protect. This includes application of an award-winning sector specific scorecard GRO Score and a completely inhouse developed ML based banking segmentation module. During the COVID induced lockdown the company worked towards deploying Video KYC, Video PD and digitally signed agreement modules towards enhanced customer experience manifolds.

U GRO Capital’s approach and orientation are strongly suited to benefit from OCEN, Account aggregators (AA) and Loan service providers (LSP) ecosystem. This enabled the company to be a part of first wave of lenders to successfully integrate with the path-breaking GeM Sahay initiative.

In the early days of the COVID-19 breakout in US, the epicentre of cases in majority of the states were identified as the meat and poultry farms and processing units. The increasing cases of Covid arising out of these industries led to shut down of almost 20 industrial plants in the US including Tyson foods, JBS, Sanderson farms, Hormel foods etc. India saw a similar trend, with increase in restrictions, the demand for dairy farm products also fell. Sugar, Jaggery & Alcohol industries also got severely impacted due to fall in demand. There were also various misconceptions and rumours that were present with regards to spread of virus through the food chain.

However, with pro-active steps by WHO to spread the right information and the measures implemented by these industries to make the production units safer has helped revived demand. The food value chain which was earlier based on principles of efficiency were realigned to base it on resilience.

The initial impact on the small businesses in this industry was severe, however, with the adaptation of the food chain, increasing awareness among the consumers and built in resilience has helped allay the concerns. While the disruptions due to lockdown and restrictions shall have some impact on the cash flows of this business, but with the building resilience, the sector is expected to be able to weather all such issues.

U GRO Capital’s technology architecture started with the building out of internal core processing platforms – LOS and LMS. Post this, the focus has been on developing tech modules for facilitation of each distribution channel viz. GRO Xstream for BFSI, GRO+ for Traditional Branch-led, GRO Chain for Ecosystem and GRO Direct for Direct Digital.

MSMEs can avail capital through the company’s operational four-pronged distribution model. Traditional branch-led channel allows them to source secured and unsecured business loans through GRO-Partners (DSAs). Secondly, the company’s partnerships & alliances channel: allows the businesses to obtain credit through its fintech, machinery and BFSI partners to acquire both secured and unsecured term loans with a range of tenures and rates basis security and collateral type. Thirdly, the company’s ecosystem channel allows vendors, dealers and distributors of the company’s partner anchor corporates to avail supply chain financing from the company, with invoice collateral. Lastly, U GRO Capital’s direct digital channel provides SMEs a route to directly apply for financing through company’s website, or through its fintech partnerships.

We have witnessed a greater focus of highest order, when it comes to support MSMEs during the pandemic. In addition to multiple initiatives undertaken, efforts are required to empower the MSMEs to become aware about the digitization. This will go a long way in their transition to the formal economy, to be able to access convenient financing.  The government had announced the emergency credit line guarantee scheme (ECLGS) and other financing initiatives which were very effective in helping the MSMEs to tackle the pandemic impact. However, since more than 80% of the allocated amount has been exhausted and a significant portion of MSMEs still require the financial support, government should consider enhancing the package or similar such tool, to ensure healthy revival of the MSMEs. Also, it has now been well-recognized that the NBFCs and fintechs, leveraging digital lending have the capabilities to reach to the last mile customers. Hence, it becomes imperative for the government to further empower them to provide financing to the underserved and unserved businesses. The TLTRO schemes announced were effective in extending the essential liquidity support to the NBFCs. To further enhance the support, the government should work towards establishing a dedicated institutional framework providing liability to the NBFCs, something which is existent for the mutual funds and insurance sectors. This role has been played to some extent by SIDBI, yet a more focussed approach is needed to ensure the intended result.

For U GRO Capital, the micro enterprises segment has emerged as a sector by itself, in its two year operational business experience. The Company recently launched its aspirational GRO Micro distribution channel which was complemented with an expansion of 25 branches in 5 identified states across Tier III to VI towns to service the microenterprises segment. It further aims to scale up the GRO Micro network to 100 branches, by the end of FY 22. U GRO Capital has also applied for a patent for its distinguished methods and systems for modelling scorecards enabling its underwriting model to generate customized credit scores to suit the peculiarities and nuances of varied business enterprises. On the back of this underwriting model, the Company aims to reach out to 250,000 MSMEs in the coming 4 financial years. Further, in late May this year, U GRO Capital became the first lender in the country to successfully record invoice discounting transactions on the revolutionary GeM Sahay platform. Continuing with such innovations and achievements, U GRO Capital’s long-term goal is to acquire 1% market share of MSME lending business in the nation.